Euro soared yesterday amid weak labor market data in the US.
Aside from that, the European Central Bank said it is ready to adjust all of its instruments (including deposit rates) to ensure that the target inflation and employment levels will be reached, saying that it is not the time to relax, but to act quickly to any changes in the economy.
The ECB also mentioned that the euro's steady increase in the market is starting to be a problem, since a very high rate has a negative impact on inflation. The COVID-19 pandemic also continues to affect activity, hence, economic prospects in the EU remain fairly uncertain.
As for the United States, President Joe Biden has begun active work on vaccination. This would help fuel economic recovery, but only on the condition that Biden can find a new source of vaccine. At the moment, only 15% of the country's population has been vaccinated. Because of this, Biden set up a meeting with Pfizer to talk about new vaccine doses.
But the current supply of drugs is insufficient. Even Europe faces a similar problem. Therefore, the White House said it would use the "Defense Production Act" to help Pfizer obtain additional equipment quickly, so that it could scale up the production and release of additional doses of the vaccine.
With regards to macro statistics, the European Commission said consumer confidence in the EU rose to -14.8 points this February, slightly lower than the expected -15 points. The corresponding indicator, meanwhile, increased to -15.7, from -16.5 in the previous month. The final data for this indicator will be released on February 25.
For the US, the Department of Labor said jobless claims have risen to much higher levels than forecasted. Initial claims have jumped to 861,000, up from the expected 765,000. This suggests that the labor market is still suffering from the coronavirus pandemic. But many expect that Joe Biden's proposed assistance program will help the sector recover.
Residential construction also dropped very significantly in the US. The number of new homes fell by 6.0% this January, reaching only 1.580 million a year. This did not come as a surprise though because economists already expected this sector to slow this 2021, since developers will face constraints such as high material prices and labor shortages. But demand for housing will remain amid low mortgage rates and supply shortages.
Import prices also rose this January, jumping by 1.4% instead of the expected 1.0%.
Manufacturing activity also climbed up, albeit a bit slower than the previous months. The Philadelphia Fed said the index came out at 23.1 points this February, a bit lower than the 26.5 points recorded a month earlier. Economists had expected the index to value only 20.0 points. In any case, manufacturing activity is expected to continue to pick up this 2021 amid increased demand for goods, restocking and a recovery in business investment.
Today, PMI reports in both manufacturing and service sectors (from the EU) will be released, and they will set the tone for the market in the morning. Then, similar figures will be published in the afternoon, but this time they will be from the United States.
With regards to EUR/USD, bulls have successfully pushed the quote above 1.2080. However, ahead is a rather strong resistance (1.2120), in which going beyond will allow the euro to continue rising towards 1.2165. But if the quote drops below 1.2080, EUR/USD will collapse to 1.2035, and then to the base of the 20th figure.
